Having a child is one of the greatest joys a person can have. But with the joys also come the additional responsibilities that need careful planning and navigation on part of the new parents. New parents often get overwhelmed with the responsibility of financial planning for not only the newborn but also for themselves. Managing the finances more often than not becomes a huge task at least in the initial days. The joys of parenthood eventually get overshadowed by the financial burden and keeping up with the needs of the new baby and also planning a good future for the entire family.
It is therefore essential for the new parents to carefully plan their finances and ensure that they can provide a safe and secure future for themselves and their children. Here are a few pointers that can be followed by new parents to manage their finances effectively and simply enjoy their time with their newborn without any financial hassles.
Tips to manage finance for new parents
Managing the finances when you have a newborn can be difficult even for people who are disciplined with their finances. The unexpected trips to the doctor or the additional expenses on account of planning for the child’s education, financial security, etc. are just a few additional things to look out for while managing the finances. Given below are a few things to consider by new parents to manage their finances.
- Planning a monthly budget
The first and foremost thing for any financial planning is setting a budget. Here too, one of the first things to be considered by new parents is the monthly budget. It is essential to not underestimate the expenses and have a sufficient budget to meet all the needs of the newborn as well as other important non-negotiable expenses.
- Setting up an emergency fund
When you have a child at home you never know when a simple day can turn into an emergency situation and you may need to rush to the doctor. It is therefore essential that there is a sufficient emergency fund at one’s disposal at all times. An emergency fund will help in giving the new parents a much needed breather without having any financial stress.
- Keep the expenses in check and avoid non-essential expenses
New parents try to give the best of everything for their child and this often leads to splurging in baby stores on toys, clothes, additional baby material like cribs, cots, etc. It is essential to remember here that babies do not need much to be happy and healthy. Hence, it is better to avoid unnecessary expenses and extravagance.
- Increase investments for new goals
Insurers today have many children’s plans that can take care of the education and higher education needs of the child along with their financial expenses in the long run. The majority of experts suggest investing in the child’s education plans right from the time they are born. This helps parents gradually build a huge corpus for their child’s education and secure their future. Parents have multiple options to choose from for children’s plans. They can select the plan that is most suited to their needs in terms of premium payments or amount to be invested in, tenure, investment objectives, etc.
- Plan for retirement
While planning a better future for the child is every parent’s responsibility, it is important that they do not forget to plan for their retirement too. Starting to plan for retirement at a later stage of life is a bad move. In such cases, individuals will have limited time to have sufficient funds to secure their retirement and not be dependent on anyone, even their children. Hence, it is important to remember that planning for retirement and making sound investments should also be given due importance along with securing the newborn’s future
Additional points to consider
Apart from the above essential tips to manage the finances, there are a couple of additional points that should not be ignored by new parents. Given below are the details of the same.
- Having a health insurance cover for the child
Not many new parents are aware that they can get health insurance cover for their newborns. A standard health insurance plan includes coverage for spouses and children. The waiting period for such health insurance policies to include cover for newborns is different depending on their guidelines. However, most insurers provide coverage for newborns after about 90 days of their birth. An effective health insurance cover will further relieve the parents in times of a medical emergency and help them focus solely on caring for the child.
- Increase in the term or life insurance coverage
Term insurance or life insurance is an essential investment for every individual, especially if they are the sole earning member of the family. Having a newborn will increase the responsibilities of the parent and the financial needs of the family. Hence, it is better to increase the cover of the term insurance or the life insurance already in place to meet the additional needs of the family.
Conclusion
There is no definite formula for optimum financial planning and management. It is a difficult task for most individuals. Add a newborn into the mix and all the planning usually goes for a toss. This current pandemic is one of the many examples that showcase the need for sound financial management to safeguard against any unforeseen circumstances and to ensure that there is no hurdle in providing optimum care for a newborn.
FAQs
1. Is a newborn allowed to be included in the health insurance plan?
A. Yes. parents can include their newborn in the existing health insurance plan. Most insurers extend the health insurance cover for the newborn child after 90 days from their birth.
2. Is it advisable to cut down on investments to increase the net monthly expendable income?
A. No. Cutting down on investments to have more expendable monthly income at hand is a dangerous move. It will harm the individual in the long run when they will have limited corpus to meet their financial needs or objectives. It is rather better to identify and cut down unnecessary monthly expenses like dining out multiple times, cutting back on expensive online shopping, frequently changing expensive gadgets, etc. to increase the net monthly expendable income available to the new parents.
3. What are some of the easiest investment options for parents of newborns?
A. Mutual funds can be one of the easiest investment options for parents of newborns. Parents can start with SIPs with amounts as low as Rs. 500 per month to gradually build a corpus fund to meet their investment objectives.
4. How can a person invest in mutual funds?
A. Investment in mutual funds can be easily done through Fisdom App. Investors can download the app from Google Playstore or Apple Store and login using the username and password generated at the time of registration. The next step is to select the fund and make the payment using any of the online payment modes.
5. What is the ideal amount of emergency funds that a new parent should preferably have?
A. There is no exact formula or amount that can be defined as ideal for an emergency fund. However, it is always better to accumulate enough funds in the emergency fund that can help to survive at least six months to a year without any constant source of income.
